Stock market crash: Sensex plunges nearly 1,000 points; 5 Factors That Brought Down Indian Stock Market Today

Stock market crash: Falling for the fourth consecutive session, the Indian stock market suffered major losses on Thursday (December 19), with the benchmark Sensex collapsing by nearly 1,200 points and Nifty falling back to the 23,870 level in intraday trade after the US Fed has signaled that the pace of rate cuts could be slower. move forward.

In the last four losing sessions, the Sensex is down 3.5 percent and the Nifty 50 is down 3.3 percent.

Sensex opened at 79,029.03 against its previous close of 80,182.20 and lost 1,162 points to the day’s low of 79,020.08. Similarly, the Nifty 50 opened at 23,877.15 against its previous close of 24,198.85 and lost 329 points to 23,870.30.

The market, however, pared some losses. Finally, the Sensex closed down 964 points, or 1.20 percent, at 79,218.05, while the Nifty 50 closed down 247 points, or 1.02 percent, at 23,951.70. .

Mid and small cap segments outperformed large caps. The BSE Midcap index fell 0.30 percent, while the BSE Smallcap index fell 0.28 percent.

The overall market capitalization of companies listed on the BSE has fallen to almost ₹450 lakh crore close ₹453 lakh crore in the previous session, causing investors to lose nearly 453 lakh crore ₹3 lakh crore per day. Over the past four days of losses, investors have lost ₹9 lakh crore, while the overall market capitalization of BSE-listed companies stood at ₹459 lakh crore on Friday, December 13.

Sector indices today

Most sectoral indices suffered significant losses on Thursday with Nifty Bank, Financial Services, IT and Consumer Durables falling by one per cent.

On the other hand, bucking the trend, the Nifty Pharma index jumped almost 2 per cent.

What caused the Indian stock market to fall today?

Let’s take a look at five key factors behind the current sell-off in the Indian stock market:

1. The US Fed factor

Although the US Federal Reserve cut its benchmark interest rate by 25 basis points on December 18 to 4.25-4.50 percent – ​​in line with market expectations – its prospects for a rate cut dampened global market sentiment. The Fed revised its rate cut outlook, projecting only two new rate cuts by a quarter of a percentage point by the end of 2025, when the market was expecting three or four rate cuts.

Major Asian markets fell following a 3 percent fall in the S&P 500 and the Nasdaq, and the U.S. dollar jumped to near its highest level in two years after the U.S. Fed’s remarks.

“Even though the 25 basis point rate cut was in line with market expectations, the indication of only two reductions of 25 basis points each in 2025, when the market was expecting three or even four reductions, spooked the market, leading to a sharp sell-off on Wall Street,” observed VK Vijayakumar, chief investment strategist at Geojit Financial Services.

2. Foreign capital outflows

Sustained selling of Indian stocks by foreign institutional investors (FIIs) has been one of the main reasons for the recent slowdown in the Indian stock market.

FIIs sold Indian stocks worth over ₹8,000 crore in the last three sessions amid a strengthening dollar, rising bond yields and prospects of smaller rate cuts from the US Fed next year.

Foreign capital outflows are weighing on market sentiment, although purchases by domestic institutional investors (DIIs) are cushioning the fall in the domestic market.

3. The rupee at a record high

The Indian rupee hit an all-time low of 85.3 per dollar on Thursday, hurting market sentiment.

The weak rupee discourages foreign investors from investing in the Indian market. This reduces their earnings when they convert them back into their original currency, leading to foreign capital outflows and increasing pressure on markets.

A weak rupee also simply means higher inflation as imported goods and raw materials become more expensive. And higher inflation means tighter monetary policies, which again is negative for the market.

4. Macroeconomic difficulties

Fresh concerns have emerged over India’s deteriorating macroeconomic situation, affecting market sentiment.

The country’s trade deficit widened to a record level in November.

As Mint reported Previously, the trade deficit, or the amount by which the value of imports exceeds exports, hit a record $37.84 billion, up from $21.31 billion in November 2023. A poll by Bloomberg economists had predicted a deficit of 23 billion dollars.

Furthermore, overall economic growth is also showing signs of slowing down. India Second quarter GDP circulations reached their lowest level in almost two years and recorded slowing growth for the third consecutive quarter.

5. Uncertainty over the recovery of profits

After weak profits for Indian companies in the first and second quarters, all eyes are on the December quarter (Q3) results. Although experts expect a recovery in profits, they suggest that a decent recovery could only be expected from the fourth quarter.

“We have not yet seen any data sets to suggest a recovery in profits. However, it is expected that, driven by government capital spending and other spending, a better agricultural season may lead to a recovery in profits in the third and fourth quarters.” Santosh Kumar Singhfund manager of Motilal Oswal Mutual Fund, told Mint.

“Unless we see a strong earnings recovery, which is not yet visible, we could see year 25 being subdued from a share price performance perspective. Resumption of earnings growth would be a key trigger for the market,” Singh said.

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